Pichel v. Dryden Mutual Insurance

Citations: 117 A.D.3d 1267; 986 N.Y.S.2d 268

Court: Appellate Division of the Supreme Court of the State of New York; May 15, 2014; New York; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

An appeal was filed by the defendant concerning a May 23, 2013 order from the Supreme Court of Tompkins County which granted the plaintiff's motion for partial summary judgment. The plaintiff owns a four-building apartment complex insured by the defendant. Two buildings incurred significant water damage due to wastewater entering through toilets, bathtubs, and condensation drains. Despite timely notice of the property loss, the defendant denied coverage, citing multiple policy exclusions, particularly the 'Water Damage' exclusion for losses from water backing up through sewers or drains. The plaintiff argued that the damage resulted from an accidental overflow of the plumbing system, which should be covered under the policy.

After discovery, the plaintiff sought partial summary judgment on liability while the defendant cross-moved to dismiss the complaint. The Supreme Court ruled in favor of the plaintiff, declaring coverage for the loss and denying the defendant's cross-motion. The defendant's appeal contends that the court misinterpreted the policy. It referenced the 'Water Damage' exclusion, which is supposed to preclude coverage for losses from sewer backups, and a second exclusion that states there is no coverage for continuous discharge from plumbing systems but allows for accidental leakage or overflow. 

The Supreme Court interpreted the two provisions as ambiguous, suggesting that the first exclusion pertains to backup from external sources, while the second applies to incidents originating from within the insured property. The court emphasized that the insurer must clearly demonstrate that the exclusion is unmistakable and applicable in this case. Additionally, the interpretation must preserve the meaning of all policy language without rendering any part ineffective.

Unambiguous insurance policy provisions are interpreted based on their plain meaning, while ambiguities are resolved against the insurer. In this case, an ambiguity exists regarding coverage for losses from backups or overflows from sewers, drains, and plumbing systems. The Supreme Court's interpretation aligns with other jurisdictions, stating that a plumbing system includes drains on the insured's property. Water damage caused by backups from within the property is covered, while backups from external sources, like municipal sewers, fall under exclusion. The defendant's argument that any backup through a sewer or drain excludes coverage was rejected, as this interpretation would undermine the coverage for overflow from plumbing systems. The plaintiff’s interpretation, which maintains the integrity of both coverage and exclusion provisions, is upheld and consistent with relevant case law.

The Supreme Court resolved an ambiguity in favor of the plaintiff and denied the defendant’s cross motion for summary judgment. However, the court erred in granting the plaintiff’s motion for partial summary judgment, as the plaintiff failed to provide sufficient admissible evidence to prove that a loss occurred and that it was covered by the insurance policy. The plaintiff's evidence included a sworn statement claiming the loss stemmed from an accidental plumbing overflow and deposition testimony from property manager Peter Bentkowski, who reported multiple tenant complaints about water intrusion. Although Roto-Rooter attempted to address the issue, Bentkowski admitted he had no knowledge of any investigation that determined the cause of the backup or its location. Statements from a claims adjuster and engineer regarding the backup were deemed inadmissible hearsay. Viewing the evidence in the light most favorable to the defendant, the lack of admissible proof regarding the actual cause of the damage led to the denial of the plaintiff’s motion for partial summary judgment. The court modified the order, reversing the grant of the plaintiff's motion while affirming the remainder. The insurance policy's ambiguous terms regarding "overflow" and exclusions were also highlighted, as both parties presented reasonable interpretations, leading to a resolution in favor of the plaintiff.